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Prosperity Bancshares (PB) Stock Gains 4% on Q3 Earnings Beat
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Shares of Prosperity Bancshares Inc. (PB - Free Report) rallied 4% in response to better-than-expected third-quarter 2023 results. Earnings per share of $1.20 beat the Zacks Consensus Estimate by a penny. The bottom line, however, decreased 19.5% from the prior-year quarter. The reported quarter figure includes merger-related provisions and expenses.
Results benefited from higher non-interest income and no provisions. Further, a solid loan and deposit balance offered some support. However, lower net interest income (NII) and higher expenses were the headwinds.
Net income available to common shareholders was $112.2 million, down 17.4% year over year.
Revenues Fall & Expenses Increase
Net revenues were $278.3 million, down 5.8% from the prior-year quarter. The top line marginally surpassed the Zacks Consensus Estimate of $278.2 million.
Net interest income (NII) was $239.5 million, down 8.1% year over year. Net interest margin (NIM), on a tax-equivalent basis, shrunk 39 basis points (bps) to 2.72%. Our estimates for NII and NIM were $241.2 million and 2.85%, respectively.
Non-interest income totaled $38.7 million, up 11.7%. The rise was mainly driven by an increase in almost all the components of non-interest income, except non-sufficient funds (NSF) fees and net loss on sale or write-down of assets. Our estimate for non-interest income was $36.5 million.
Non-interest expenses increased 11% to $135.7 million. The rise was largely due to an increase in almost all cost components except other real estate expenses. The reported quarter also included merger-related charges of $1.1 million. Our estimate for non-interest expenses was $135.4 million.
The efficiency ratio was 48.74%, up from 41.38% in the prior-year quarter. A rise in the efficiency ratio indicates lower profitability.
As of Sep 30, 2023, total loans were $21.4 billion, down 1% from the previous quarter. Deposits totaled $27.4 billion, down marginally.
Credit Quality Weakens
The company recorded nil provision for credit losses during the reported quarter. As of Sep 30, 2023, total non-performing assets were $69.5 million, up drastically from $19.9 million at the prior-year quarter end.
Net charge-offs were $3.4 million, up 91.5% from the year-ago period. The ratio of allowance for credit losses to total loans was 1.64%, up 12 bps.
Capital & Profitability Ratios Deteriorate
As of Sep 30, 2023, Tier-1 risk-based capital ratio was 14.98%, down from 15.44% recorded in the prior-year quarter. The total risk-based capital ratio was 16.05%, down from 15.09% as of Sep 30, 2022.
At the end of the third quarter, the annualized return on average assets was 1.13%, down from 1.45% at the end of the prior-year quarter. Annualized return on average common equity was 6.39%, down from the year-earlier period’s 8.24%.
Share Repurchase Update
During the reported quarter, Prosperity Bancshares did not repurchase any shares.
Our Take
Supported by robust loans, higher rates and opportunistic acquisitions, PB is well-positioned for top-line growth. Further, the company remains committed to acquiring Lone Star State Bancshares, Inc., pending regulatory approvals. The deal was announced in October 2022.
Rising expenses and a worsening operating backdrop are major near-term concerns.
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise
Associated Banc-Corp’s (ASB - Free Report) third-quarter 2023 earnings of 53 cents per share met the Zacks Consensus Estimate. The bottom line declined 14.5% from the prior-year quarter.
In the reported quarter, ASB recorded a decline in NII and non-interest income. Also, expenses increased marginally, which, along with higher provisions, was a negative. However, a sequential rise in loan balances aided the results to some extent.
BankUnited, Inc. (BKU - Free Report) third-quarter 2023 earnings per share of 63 cents missed the Zacks Consensus Estimate of 71 cents. The bottom line also declined 43.8% from the prior-year quarter.
BKU’s results were adversely impacted by an increase in non-interest expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income acted as a tailwind.
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Prosperity Bancshares (PB) Stock Gains 4% on Q3 Earnings Beat
Shares of Prosperity Bancshares Inc. (PB - Free Report) rallied 4% in response to better-than-expected third-quarter 2023 results. Earnings per share of $1.20 beat the Zacks Consensus Estimate by a penny. The bottom line, however, decreased 19.5% from the prior-year quarter. The reported quarter figure includes merger-related provisions and expenses.
Results benefited from higher non-interest income and no provisions. Further, a solid loan and deposit balance offered some support. However, lower net interest income (NII) and higher expenses were the headwinds.
Net income available to common shareholders was $112.2 million, down 17.4% year over year.
Revenues Fall & Expenses Increase
Net revenues were $278.3 million, down 5.8% from the prior-year quarter. The top line marginally surpassed the Zacks Consensus Estimate of $278.2 million.
Net interest income (NII) was $239.5 million, down 8.1% year over year. Net interest margin (NIM), on a tax-equivalent basis, shrunk 39 basis points (bps) to 2.72%. Our estimates for NII and NIM were $241.2 million and 2.85%, respectively.
Non-interest income totaled $38.7 million, up 11.7%. The rise was mainly driven by an increase in almost all the components of non-interest income, except non-sufficient funds (NSF) fees and net loss on sale or write-down of assets. Our estimate for non-interest income was $36.5 million.
Non-interest expenses increased 11% to $135.7 million. The rise was largely due to an increase in almost all cost components except other real estate expenses. The reported quarter also included merger-related charges of $1.1 million. Our estimate for non-interest expenses was $135.4 million.
The efficiency ratio was 48.74%, up from 41.38% in the prior-year quarter. A rise in the efficiency ratio indicates lower profitability.
As of Sep 30, 2023, total loans were $21.4 billion, down 1% from the previous quarter. Deposits totaled $27.4 billion, down marginally.
Credit Quality Weakens
The company recorded nil provision for credit losses during the reported quarter. As of Sep 30, 2023, total non-performing assets were $69.5 million, up drastically from $19.9 million at the prior-year quarter end.
Net charge-offs were $3.4 million, up 91.5% from the year-ago period. The ratio of allowance for credit losses to total loans was 1.64%, up 12 bps.
Capital & Profitability Ratios Deteriorate
As of Sep 30, 2023, Tier-1 risk-based capital ratio was 14.98%, down from 15.44% recorded in the prior-year quarter. The total risk-based capital ratio was 16.05%, down from 15.09% as of Sep 30, 2022.
At the end of the third quarter, the annualized return on average assets was 1.13%, down from 1.45% at the end of the prior-year quarter. Annualized return on average common equity was 6.39%, down from the year-earlier period’s 8.24%.
Share Repurchase Update
During the reported quarter, Prosperity Bancshares did not repurchase any shares.
Our Take
Supported by robust loans, higher rates and opportunistic acquisitions, PB is well-positioned for top-line growth. Further, the company remains committed to acquiring Lone Star State Bancshares, Inc., pending regulatory approvals. The deal was announced in October 2022.
Rising expenses and a worsening operating backdrop are major near-term concerns.
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise
Prosperity Bancshares, Inc. price-consensus-eps-surprise-chart | Prosperity Bancshares, Inc. Quote
Prosperity Bancshares currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Associated Banc-Corp’s (ASB - Free Report) third-quarter 2023 earnings of 53 cents per share met the Zacks Consensus Estimate. The bottom line declined 14.5% from the prior-year quarter.
In the reported quarter, ASB recorded a decline in NII and non-interest income. Also, expenses increased marginally, which, along with higher provisions, was a negative. However, a sequential rise in loan balances aided the results to some extent.
BankUnited, Inc. (BKU - Free Report) third-quarter 2023 earnings per share of 63 cents missed the Zacks Consensus Estimate of 71 cents. The bottom line also declined 43.8% from the prior-year quarter.
BKU’s results were adversely impacted by an increase in non-interest expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income acted as a tailwind.